If you work, this news will be helpful to you as well. At the federal level, plans are in motion to expand social security coverage. According to the information provided, the Employees Provident Fund (EPF) plan would soon raise the PF wage limit from Rs 15,000 to Rs 21,000 at the Centre. The Centre has raised this cap earlier in 2014. The government raised the PF wage limit from Rs. 6500 to Rs. 15000 in 2014. This will be a significant step towards achieving universal social security if it is implemented. This will assist the paid class in thousands.
It is up to the incoming government to decide.
For the past few years, no action has been taken in response to the suggestion to raise the EPF wage cap. This suggestion is currently being reexamined. An individual involved in the case stated that all possibilities are being considered, according to news reported in the Economic Times. The new government has the authority to make any decisions in this regard. He stated that the government must proceed in this manner if it hopes to include an increasing number of workers in the social security system.
There will be an impact on the pension that employees get.
The rise in the salary cap will benefit thousands of workers. In most states, the minimum wage is between Rs 18000 and Rs 25000. The implementation of this proposal will also have a direct impact on the amount of contribution made in the EPF scheme and Employee Pension Scheme (EPS). Along with this, it will also affect the pension received by the employee at the time of retirement.  The amount contributed to a pension will rise.
The Employee Pension Scheme (EPS) account contribution is currently determined using a base salary of Rs 15,000 per month. A contribution of Rs 1800 is subtracted from the employee’s pay based on this. This means that the monthly maximum contribution to the EPS account is restricted to Rs 1,250. EPS will be impacted as well by the increase in the salary cap to Rs 21,000. Following this, the EPS contribution per month will be Rs 1,749, or 8.33% of Rs 21,000.
A sum of 3.67% is placed into the EPF account.
We would like to inform you that the employee’s whole contribution is placed into the Employee Provident Fund (EPF). However, 8.33% of the employer’s 12% contribution is deposited in the Employee Pension Scheme (EPS). The remaining 3.67% is deposited in the EPF account. Due to the increase in the salary limit under the EPF scheme, the pension received at the time of retirement will also increase.
Will something be gained or lost?
Whether raising the pay cap will benefit you or cause you to lose out is a significant matter. Let us inform you that, as of right now, employees contribute Rs 1800 to their EPF accounts for every Rs 15000. However, this donation will now be Rs 2520 because the maximum has been raised to Rs 21000. That implies a Rs 720 decrease in your in-hand salary. However, over time, you will benefit from your EPF contributions and retirement pension.
When was the most recent alteration made?
In 2014, there was a modification earlier. Subsequently, the salary cap was raised from Rs 6,500 to Rs 15,000. Conversely, the upper restriction on the salary in Employees’ State Insurance Corporation (ESIC) is higher. There is a higher salary limit of Rs 21,000 in ESIC since 2017.
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